Orissa State Financial Corporation vs Sukanti Mohapatra 2024 INSC 256 – S 29 State Financial Corporations Act

State Financial Corporations Act, 1951; Section 29 – Haryana Financial Corporation & Anr. v. Jagdamba Oil Mills (2002) 3 SCC 496 judgment explained: Section 29 gives a right to the financial corporation inter alia to sell the assets of the industrial concern and realize the property pledged, mortgaged, hypothecated or assigned to the financial corporation. This right accrues when the industrial concern, which is under a liability to the financial corporation under an agreement, makes any default in repayment of any loan or advance or any instalment thereof or in meeting its obligations as envisaged in Section 29 of the Act. Section 29(1) gives the financial corporation in the event of default, the right to take over the management, possession or both, and thereafter, deal with the property – Guidelines issued in Mahesh Chandra v. Regional Manager, U.P. Financial Corporation ((1993) 2 SCC 279), place unnecessary restrictions on the exercise of power by the financial corporation contained in Section 29 of the Act, by requiring the defaulting unit-holder to be associated or consulted at every stage in the sale of the property. A person who has defaulted is hardly ever likely to cooperate in the sale of his assets. In fact, the procedure indicated in Mahesh Chandra (supra) would only result in a further delay in realization of the dues by the Corporation through sale of assets. Thus, the observations in Mahesh Chandra (supra) do not lay down the correct law and was overruled -Kerala State Financial Corporation v. Vincent Paul (2011) 4 SCC 171 distinguished: The judgment in Kerala Financial Corporation (supra) carries only a cursory reference to Section 29 of the Act, and has laid down guidelines for the sale of properties owned by the Kerala Financial Corporation, in the absence of State specific rules for the same. The guidelines deal with the aspect of proper valuation of the property, and do not comment on or prescribe a procedure for other aspects of the recovery process. (Para 25-26)

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